To Buy or to Rent?

One of the most striking changes in the lives of ordinary Australians in the last fifty years has been in the affordability of housing. In the 1950s and 1960s it was relatively easy to become a house-buyer, if not an owner. Not only that, it was the thing to do. Your parents suggested it, and banks and insurance companies were prepared to help. You needed to have a job, a good record in saving money, and the deposit, which was usually a third, though some employers had arrangements with banks that would allow a smaller fraction.

When I started as an undergraduate, earning the unheard-of sum of £180 a year from my teachers college scholarship, my father advised me to buy a whole-of-life policy from the AMP, and to maintain the policy. To do so would show potential lenders, when I needed them later, that I was a sober, thrifty citizen. It cost me very little, and I followed his advice. Seventeen years later the AMP lent me money to buy a house in Sydney, on the strength of my job there, but more importantly, on the basis of my policy with them.

The 1950s and 1960s were the beginning of the great suburban building boom. Land was relatively cheap, and in Canberra blocks could be bought for £10 once the auction was over, if there had been no sale. They weren’t great blocks, but you had a start. If you had bought your land, lenders were ever so much more ready to provide you with the capital for building the house.

So my generation started saving (jobs were more than plentiful), getting the deposit, buying the land and building the house. We married young, too, and both partners worked, at least until the kids came, and reliable contraception was now available. We took out loans — the longer the term and the cheaper the interest, the better. My parents had a 40-year loan taken out during the Depression, on a house in Newcastle, that accompanied them as they moved from house to house. When Dad retired the loan still had a few years to run, but by then he had paid off the interest; what he was paying back now was simply the capital. Mum was anxious that he pay the loan right off. It was a psychological thing. She wanted the feeling that they owned their house, and that no one could take it away from them. He explained the reality, but she persisted. So he shrugged, and paid it off. The Depression had been kind to them, because he was a teacher, and had a job throughout, but the experience of living through it greatly affected their attitudes to security, money and work, which they passed on to their children.

Most of Australia’s housing stock has been built in and since the 1950s and 1960s, and the great change to our day has been in the cost of land. Whereas in the 1960s the house might have cost three times the value of the land, in today’s Australia the land might be equal in cost to the house on it. In the rebuilding of our suburbs that is going on old houses will be knocked down in a day, and a new one built . The land might be twice the value of the new house. And housing today is much more efficiently built than it was then.

The increased price of land is the main reason for today’s ‘housing crisis’. Today we automatically look for whom to blame, for everything that goes wrong, but that is not my aim here. State Governments, beset for the past hundred years with demands greater than their resources, have become property developers, as well as land tax and stamp-duty leviers. The GST was intended to get rid of these imposts, but they are still here. The ACT Government is doing a herculean job in preparing 5000 blocks a year for new housing, but the land is still expensive.

I do not have a solution. My generation has been helpful to its children, in making it easier for them to buy houses, but our population is growing faster than the housing stock. And those in our children’s generation have different values, opportunities and problems. They do not marry young, they do not have a single career path, they travel overseas as soon as they can, and buying a house is not as high on their priorities as it was for my lot. So a lot of them rent, and move up the rental market rather than investing in a house. They also want to live close in rather than a long way out. If that is the priority, then renting is the only way to go unless you are really well off.

Housing has been difficult before. When my grandparents were young, working people rented, or lived at home with their parents, even after marrying. One pair of them went into the Starr-Bowkett housing scheme, and their luck was in: they became the owners of a house that was built right at the edge of Sydney, in Park Road, Auburn. It’s nowhere near the edge of the city today. Housing was awfully difficult from about 1940 to the middle 1950s, when there was a shortage of everything you needed to build a house, and all the factories needed replacing because of the stress of wartime production.

For many today, renting is what they have to do. In time, with a bit of luck, they will find an opportunity to break into the housing market. It’s probably important to do so well before retirement; pensioner renters do not have an easy time of it. And our governments are caught.On the one hand they want affordable housing, and on the other hand they need the income that comes from high-priced housing.

Another Depression would shake things up quite a bit, and remove some of the tension from the housing market. It would, of course, being a whole lot of other problems in its wake.We don’t want that solution, either. For the moment, we just have to put up with it.